Combining Strategies — Video

Combining strategies as an integral part of your overall retirement plan will yield superior results. Have you ever combined strategies?


Transcript:   Hi this is Jeff Brown the “BawldGuy”. Today, we’re going to talk about combining long and short-term investment strategies in real estate. There are people out there that do flips, and some of them have long-term investments and some of them want to. What I’m here to tell you today is how to combine those two to get a synergistic effect. Here’s what I mean by that. You’re making a profit on your flips, and let’s say you’re doing two flips a year. You just got started. If you’re making say, $20,000 before tax each flip, let’s assume that you’ve got about … I don’t know, maybe 13 or 14,000 after tax from the profit. You still haven’t seed and fix up money. You’re not going to touch that. What I would tell you to do, at that point, is to take that after tax profit and pay down the debt of one of your rentals. Now, what this does is, obviously, is increase the velocity of getting that property free and clear. Here’s what happen when you get a property free and clear. You increase your options. The more options, the better. Always. Now when you take this long-term, short-term combination, you can actually add a third strategy. Now that third strategy, if your income at your job and flipping is over 150 grand a year, what you can do is use cost segregation, which we’ve talked about many times before. That increases tremendously two to five times the annual amount of depreciation you can take every year. You can only put it against the cash flow of your properties, though, because you’re barred from putting it against your job income. Now, this means that once you get free and clear on one of your rentals, you can sell that rental, make a capital gain. Even have what we call depreciation recapture tax, which is more than capital gains, by the way. Most people aren’t aware of that. And you can offset them mostly or even completely with the unused depreciation you have by the use of cost segregation. Now, what this does is gives you a lump of cash. It could be 100,000, it could be half a million. Whatever it is, it’s a lump of tax-free cash. What you can do is many things, but of them is, maybe over the years you got up to where you were doing two, now you’re doing once a quarter on your flips. Now, if you can add a couple hundred thousand out of 400 tax-free, look what you can do. Now you can do three or four per quarter, and add another long-term investment or two, all with tax-free money. Now you’re doing the same thing, you’re just in a faster lane with a bigger vehicle. Over time, you get more options. You get more free and clear properties faster. This results in a much better retirement income, and you got where you’re going to be able to retire from flipping sooner rather than later. Most people find that flipping after 50, just not their cup of tea. Now, the thing you want to take away from this video is this. The investor with the most options wins. When you take the long-term and short-term strategies, and combine them in this synergistic way, you give yourself more options, and you continue to do that. This is Jeff Brown the BawldGuy. Thanks for joining me today. I’ll see you next time.

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About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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